Economic outlook for 2019 and 2020 published

We expect the Dutch economy to grow by 2.1% to 2.7% in 2018. In 2019, economic growth will slow down to about 1.0%. Our forecasts suggest that the Dutch economy will fall into a recession in 2020.

Economic outlook for 2019 and 2020

Every year, in November, EUCLID publishes its economic outlook for The Netherlands. Shortly after publication, the quotes appear on this website.

Currently, our forecasts are based on two models, namely the EICIE and the BCI, which are described below. Both models are designed to accurately forecast the growth rates of Dutch real GDP. Table 1 presents the forecasts of both models, together with the September 2018 forecasts of the Netherlands Bureau for Economic Policy Analysis (CPB) and the actuals as measured by Statistics Netherlands (CBS).

Table 1. Most recent quotes of the EICIE and BCI, compared to the forecasts of the CPB and the actuals of the CBS

Forecasts of the EICIE

The Econometric Institute Current Indicator of the Economy (EICIE) is a real-time indicator for quarterly growth of the Dutch real Gross Domestic Product (GDP). Originally, the indicator was based on weekly staffing figures obtained from Randstad Staffing Services. In 2017, the model was further extended.

Based on the EICIE, we expect 1.0% growth in 2019 and 0.0% in 2020. This suggests that the Dutch economy is nearing a recession by the end of 2020.

Forecasts of the BCI

The Busines & Consumer Index (BCI) builds upon the notion that the cyclical movements in Dutch GDP can be decomposed into two sub cycles: the business cycle and the consumer cycle. The business cycle has a periodicity of approximately 5.5 years, and correlates strongly with leading and coindident business indicators, including the stock market (AEX index), business confidence and investment. The consumer cycle has a periodicity approximately 10.3 years, and correlates strongly with indicators such as consumer price indices, consumer confidence and employment.

Based on the BCI, we expect 0.9% growth in 2019 and -0.6% in 2020. This suggests that the Dutch economy will most likely enter into a recession in 2020.

Comparison of our forecasts for 2019 to those of the CPB

The CPB revises its forecasts for Dutch real GDP in March, June, September and December, as part of its 'Centraal Economisch Plan' (CEP), its 'Juniraming', its 'Macro Economische Verkenning' (MEV) and its 'Decemberraming.', respectively. In Table 1 we present the forecasts of the institute, as published in September 2018.

The institute expects economic growth in 2019 to be on par with economic growth in 2018. Compared to this forecast of 2.6%, we are relatively pessimistic, with an expected growth rate of about 1.0%, as judged by both the EICIE and the BCI. In 2020, we expect the growth rate of the Dutch economy to decline even further, to a rate between -0.6% and 0.0%.

Comparison of our forecasts to the actuals as measured by the CBS

Last updated: February 13th, 2020

Mid-February the CBS releases a so-called flash value of real GDP growth during the forth quarter of the last year. This completes their first yearly GDP measurement. The measurement is then revised up to seven times during the 2.5 years thereafter.

The most recent measurements by the CBS indicate that the Dutch economy grew by 2.6% in 2018. In Ocotber 2018, we projected 2018 growth to be between 2.0% (EICIE) and 2.7% (BCI). With hindsight, we thus conclude that the BCI produced the most accurate forecast for 2018, with a prediction error of only +0.1%. The forecast of the CPB was also very accurate, with a prediction error of +0.2%.

Our models indicated that the Dutch economy would grow by only 1.0% in 2019. We were correct that economic growth would indeed slow down in 2019. The first measurements by the CBS for 2019 suggest that the economy grew by 1.7%. We have thus made a prediction error of -0.7%. The CPB expected much higher growth in 2019, namely 2.6%, which implies a prediction error of +0.9%.